The rapid rise of ICT in Ghana attracts international interests

From a near-standing start, Ghana’s ICT sector has developed strongly since the beginning of the century, with internet take-up among citizens and businesses growing, international broadband connectivity expanding rapidly, and private sector investment on the rise.

The government, international institutions and the private sector are increasingly convinced of the Ghanaian ICT market’s potential, and the importance of the sector in broader social and economic development. However, more investment in infrastructure, products, and services is needed to capitalise on this potential, with a substantial part of the population, many businesses, and parts of the government still lagging behind in technology adoption. The e-Transform programme – launched in late 2014 and backed by $97m from the World Bank – aims to address this.

Ghana had an estimated 5m internet users in 2014, giving penetration of 19.6%, according to the CIA World Factbook. The strengthening of international broadband connectivity in recent years has seen internet service providers (ISPs) proliferate – as of 2013, the last year for which statistics were available, there were 67 in Ghana, though only 20 were in operation, according to the Ministry of Communications.

Demand Drivers

Consumer demand for internet products is being driven by instant messaging and telephonic services such as WhatsApp and Skype, as well as social media services such as Facebook and Twitter.

Demand is also driven by a desire for information, services and entertainment, from online newspapers to streaming television and video sites. In a 2014 report, “The Future of Telecoms in Africa”, professional services company Deloitte highlighted entertainment as an important area of growth, particularly for the middle classes, but notes a gap between high demand and patchy supply of content. While this is less of an issue in Ghana than in many countries, due to the widespread use of English, the potential for developing local content is nonetheless significant.

There is now also rising demand for other online services, including e-government, mobile money and banking, and mobile online health services and information. These are segments in which there is particular scope for growth in the long term. Some countries have already made significant headway in these areas, most notably Kenya’s large mobile money market. Ghana’s is also growing rapidly (see telecoms analysis) but is still evolving, with new regulations coming into force in early 2016.

As Deloitte notes, Africa is now a centre for ICT innovation in its own right, so the sector has already developed a range of products and solutions targeted at the continent’s varied markets, though in many cases also applicable in other emerging markets.

Examples include Google’s SMS service – allowing subscribers access to Gmail and Google search gateways via text message – and MTN and Orange’s datalight versions of Facebook (0.facebook, also known as Facebook Zero), valuable in markets where data access is still expensive relative to wages.

Entertainment innovations include YouTube partnerships with content providers including Nigeria’s Nollywood Love and Lagos TV for local content offerings; MTN’s Afrinolly (an African-content video application); Vodacom’s Webbox low-cost web TV; and pay-TV such as Multichoice (a South Africa-based, Africa-wide broadcaster), distributed across a range of media platforms. Not all such ventures have proved successful, however: in 2009 pan-African pay TV station GTV went into liquidation.

Meeting Business Demand

Demand for ICT services from the business sector has also grown rapidly in recent years, with companies using technology to manage office functions, and, increasingly, to interact with customers. Deloitte highlights managed data as an area that has seen particular demand, with ICT companies expanding their offerings over the past five years from a near standing-start. More difficult economic times have seen companies use ICT to manage costs and improve flexibility, while retaining scalability for the next wave of growth.

A limited pool of qualified graduates for in-house ICT functions, combined with a range of off-the-shelf options from specialist companies, has driven a trend towards outsourcing. The expansion of cloud computing in particular has helped companies reduce outlay on internal ICT staff and hardware.

International Connectivity

Ghana’s capacity to handle growing volumes of data traffic has been considerably enhanced by its improving international telecoms connectivity.

“A major driver behind the rise in the use of internet and data services in Africa is the strong growth in international connectivity to the continent over the past few years,” according to the 2014 Africa Telecoms Outlook report by Informa Telecoms & Media, a UK-based information service.

Being a coastal and politically stable nation in the centre of West Africa, Ghana is a natural landing point for international cables. The country is currently connected to five international submarine cables. The first, the South Atlantic 3/West Africa Submarine Cable (SAT3/WASC), linking Portugal and Spain to South Africa, started operating in 2001. SAT3/WASC now links to the South Africa Far East cable running from Melkbosstrand, north of Cape Town, with Penang in Malaysia.

Glo One, a cable with an initial cost of $800m and capacity of 2.5 TB/s, and backed by Nigeria’s Globacom, landed in Ghana in 2009, and links Lagos to the UK, with landfalls including Accra, Mauretania and Spain. The 1.92 TB/s, MainOne submarine cable, owned by the MainOne Cable Company of Mauritius, linked to Ghana in May 2010, initially connecting Portugal to Accra and Lagos, with an initial investment of $240m. The cable now reaches all the way to South Africa. The fourth cable, the $650m West African Cable System, reached Accra in May 2011, bringing 5.12 TB/s connections to Europe and 11 other countries in Africa. The most recent arrival is the African Coast to Europe, a $700m, 5.12 TB/s fibre-optic cable that was launched in May 2013. Mobile operator Expresso is a shareholder.

The five cables have greatly increased Ghana’s overall broadband capacity, taking it to 12.3 TB/s in 2013 and 2014, up from 2.04 TB/s in 2011. The increasing bandwidth, which operators often share, has helped push broadband prices down tenfold since 2007, according to Australian research firm BuddeComm.

Last Mile

While international connectivity brings abundant broadband capacity to Ghana and other African countries, this does not always translate to stronger broadband access for businesses, consumers, and households just inland from the subsea cables’ landfall. “Last mile connectivity” is an issue for many countries, including Ghana, with in-country cable capacity limited in some areas. To address this, in October 2015 global internet giant Google announced that it would be launching its Project Link fibre-optic network in Accra, Tema (the country’s major port, just east of the capital), and Kumasi (the second city and capital of the economically and politically important Ashanti region).

Ghana is the second country in which Google has pioneered Project Link, which links long-distance fibre cables with new urban fibre networks that ISPs and mobile operators can share and use to bring high-quality broadband to their customers.

The company expects to build 1200 km of fibre in the three Ghanaian cities – nearly twice the length of the existing Project Links in Kampala, Uganda. Construction has already started in Accra, and the network is expected to go live in 2016.

In Kampala, mobile companies have been able to roll out 4G LTE on the back of Project Link. The scheme has proved useful for public services as well as consumers and businesses. The Research and Education Network of Uganda, which provides infrastructure connecting universities across Uganda, has used Project Link to make its network faster and more reliable – supporting educational exchange between institutions, and making remote research easier.

The growth of fibre networks in Ghana would benefit Google: with the company gaining around 90% of its revenues from ad sales, the proliferation of fast, reliable internet would increase ad sales potential.

Mobile Data

With mobile telephony penetration in Ghana at over 100%, there is a widespread understanding that the medium is and will continue to be a vital driver of internet usage. Ghana’s 2015 budget projects that mobile data volumes will grow 6.3 times between 2013 and 2018. While mobile data penetration is officially around 62% as of mid-2015, the figure for the proportion of Ghanaians who are actually regular mobile data users may be closer to 15% to 20%, Russell Xu, managing director of Huawei Ghana, the local branch of a Chinese technology company, told OBG.

There are several potential catalysts for increasing this: growing the amount of online, mobile-friendly content appealing to Ghanaians; lowering the cost of smartphones (the government is considering scrapping a 20% import tax on the devices); lowering the cost of data; and making mobile broadband connections more widely available and reliable.

Long-Term Evolution

The expansion of 4G long-term evolution (LTE) broadband networks is seen as important to boosting internet take-up, and thus catalysing the growth of the ICT sector and enhancing efforts to boost e-services and e-government. The private sector, including major foreign investors, is taking the lead here.

Franco-American tech company Alcatel-Lucent and Ghanaian operator Surfline Communications launched Ghana’s first 4G LTE network in August 2014, with the former providing hardware, software, installation, maintenance and managed services.

Surfline was one of three local companies (with Gold Key Properties and G-Kwik – now Blu Telecoms) to be awarded LTE licences in 2013, at a cost of $6m, and with an initial tenure of 10 years. Surfline has invested more than $100m in the first phase of its network, including 300 cell sites, and says that it aims to boost the development of Ghana’s digital economy through its roll-out. Surfline’s launch made Ghana the sixth sub-Saharan African country to introduce LTE.

“While standards are higher than Nigeria, there’s far more infrastructure still needed,” Kazeem Oladopo, regional executive of MainOne Cable, an internet services company, told OBG. “Further LTE licensing in Ghana would be a good idea. It’s a favourable market for international companies. There’s significant growth potential in 4G. It requires less physical infrastructure, and it will also lead to better communication throughout Ghana. Furthermore, having a more consistent IT network will encourage companies and individuals to further integrate technology into their day-to-day business.”

Local Businesses

Ghana has a range of local ICT companies, many of them small and medium-sized enterprises (SMEs). There is a small but flourishing tech start-up segment that is developing a reputation as one of Africa’s most dynamic. Examples include KodeFusion GH, which has developed Dumsor, a torch application, which takes its name from a colloquial term for power cuts.

In August 2014, US-based developer Kirusa, which focuses on voice SMS-based mobile value-added services (MVAS) acquired Ghanaian start-up Saya, a developer of mobile messaging applications, for an undisclosed sum. Saya has been described as “WhatsApp for feature phones” and offers a lowcost mobile messaging service to non-smartphones, including real-time messaging and integration with social networks. It is particularly popular in Ghana, Nigeria and Kenya – all fast-growing mobile markets.

Support for companies like this comes from institutions including the Ghana-India Kofi Annan Centre for Excellence in ICT, and the Meltwater Entrepreneurial School of Technology (MEST), which was set up in 2008, backed by Microsoft and Amazon, amongst others. The institution takes 35 graduates from Nigeria and Ghana every year, and trains them intensively for two years, with the best tech business ideas then backed by an incubator programme. Both ClaimSync and Saya were set up by MEST graduates.

While there are innovative companies with solid skills bases, raising the necessary capital for expansion and access to bigger projects can be an issue.

“Financing is very hard to find for IT companies,” Eric Kwame Asah-Addo, CEO of Bista Solutions Limited, a Ghanaian IT firm, told OBG. “When banks in Ghana invest, they want to see the product that they are investing in. However, the IT business cannot provide this tangible good. Considering how small most IT companies are in Ghana, as a result of little capital to expand, they are disqualified from international financial institutions’ projects to increase IT efficiency in Ghana as well.”

Outlook

Ghana’s ICT sector has pockets of excellence, including its international broadband connectivity, thriving tech start-up scene, and a decent pace of internet penetration growth. However, development across the country, across demographic groups, and within local businesses, is less uniform. That many Ghanaians are still unconnected, businesses are not harnessing technology, and government could adopt more e-government and ICT measures, is a source of frustration. It also shows the substantial scope that exists for the sector to grow and strengthen the broader economy while improving living standards. The government’s prioritisation of ICT and rising private investment in technology like LTE, along with international support, should act as spurs to the continued growth of an industry with great potential.